Joe McHugh (Donegal North East, Fine Gael) | Oireachtas source

Gabhaim mo bhuíochas leis an Seanadóir as ucht an cheist tábhachtach seo atá á fhreagairt agam ar son an Aire, an Teachta Ó Ceallaigh.

As the Senator is aware, local authorities have three main sources of funding, namely, grants from central government, commercial rates and other locally raised charges. In recognition of the fact that certain local authorities have less opportunity to raise income locally, central government has provided much higher levels of funding to support the efforts of these authorities to provide an adequate level of public services.

In 2014, approximately 54% of Sligo's budgeted income was expected to be provided by central government, almost double the national average of 28%. This clearly shows that the Government is committed to supporting the smaller authorities, a fact further underpinned by the Government's decision to redistribute 20% of local property tax allocated nationally from 2015 to support authorities that have lower valued property bases.

The issue of cash flow in local authorities is important and certain local authorities, with very large annual expenditure, generally as a result of population levels, can hold seemingly large levels of cash at particular times. All local authorities are required to ensure they can meet the public sector payment deadline by paying agreed invoices within 15 days. For a local authority with €98 million in creditors at the end of 2013, such as Fingal County Council, having cash on hand is prudent and appropriate financial practice.

As the Senator will be aware, Sligo County Council has been incurring revenue deficits for the past number of years to the effect that the cumulative deficit now stands at over €24 million. Long-term debt is in excess of €120 million.

When this matter was raised in this House last November, Senator MacSharry suggested that Sligo County Council is in this situation in part because it has implemented Government policy, particularly in respect of water services and land purchases. The Minister wishes to be clear that the obligations placed on Sligo County Council in terms of implementing Government policy were no more onerous than in any other local authority in this respect.

As the Senator knows, the implementation of the social housing strategy is a key priority for Government and will provide an opportunity for all authorities to develop lands they purchase for housing, thus providing additional housing and alleviating associated debt.

In respect of water services, the Department's analysis shows that combined water and wastewater charges in Sligo increased by just 17% in the period 2008 to 2012 despite an increase in operating costs of 39%, suggesting that the water pricing methodology used was insufficient. The level of income collection in the water charges area was also unacceptably low at only 48% on average from 2008 to 2013. Both of these exacerbated Sligo County Council's financial and cash flow situation.

Other factors such as poor income collection and an inadequate bad debt provision policy have significantly contributed to the financial situation. The commercial rates collection level was just 59% in 2013. Collection levels for housing loans are also poor at 47%.

It is a matter for individual local authorities, including Sligo County Council, to manage their own day-to-day finances in a prudent and sustainable manner. The Department has not been prescriptive in respect of the steps Sligo County Council should take but is in regular consultation with the council in regard to its financial position.

The Minister set aside an allocation of €1 million in additional funding to 2014, and for 2015, for Sligo County Council to assist it to take the steps necessary to move to a more sustainable financial position. The payment of this funding remains fully conditional on a realistic and achievable financial plan which charts a path for long-term financial sustainability being agreed between the Department and the council. This process is ongoing.

The Minister, following a request from the council, is today meeting a delegation of elected members and senior officials regarding the council's historical and current financial position.